JXN Water uses city sanitation fees to keep utility afloat during cash flow crisis
JACKSON, Miss. (WLBT) — Millions of dollars that were supposed to go to the city of Jackson to pay for residential trash collections have instead been used to cover JXN Water operations.
That’s according to Interim Third-Party Manager Ted Henifin, who informed U.S. District Judge Henry Wingate of the news on Thursday.
“We collected it. We didn’t keep it separate from our operating funds, and we used it to keep the system afloat,” he said.
Henifin appeared before Wingate on Thursday to again lay out his case for a water rate increase.
[READ: Judge temporarily blocks Henifin’s attempt to advertise JXN Water rate increase]
During the proceedings, he told Wingate that JXN Water had withheld some $6.3 million in sanitation fee collections from the city, after Jackson failed to pay a $6.9 million water bill for the Jackson Zoological Park.
Henifin told the city back in September that the funds would be held in abeyance until Jackson paid that bill.
[READ: JXN Water withholds sanitation fees in response to city’s $6.4M water bill, official says]
But instead, the funds were used to help keep the utility afloat during its ongoing cash flow crisis.
According to the interim stipulated order governing JXN Water, Henifin was supposed to remit the funds to the city within 45 days of collection.
“By what empowerment did you hold onto the sanitation fee,” Wingate asked.
“No authority to hold it,” Henifin said. “We’re in violation of the order.”
Wingate asked Henifin whether he’d be able to repay the amount once he receives the $54 million from the federal government.
Congress recently approved legislation allowing $54 million in State Revolving Loan funds to go toward JXN Water’s operating costs.
Previously, the funds had been allocated specifically for capital improvements to Jackson’s water system.
Henifin told Wingate it could take three to six months for those funds to become available.
Even when they do, the third-party manager says he can’t use it to repay the city.
Instead, he says the city can be paid once Jackson makes its $6.9 million payment.
Wingate also asked how the money had been spent, and whether the decision to withhold the dollars had caused “some contention” between the utility and city officials.
Henifin said it had and that the funds had gone toward “invoices for sewer work… our monthly cleaning and maintenance of the sewer system [and] work on the water system.”
Meanwhile, local leaders are questioning whether the city should have to pay JXN Water the $6.9 million, saying it was the result of a leak at the zoo.
Chief Administrative Officer Pieter Teeuwissen said the leak was caused due to an issue around the chimpanzee enclosure, and that Jackson, under the previous administration, failed to repair it.
“After December 2017, rather than repairing the moat, the decision was to take a valve, turn the valve on and continuously run water into the moat,” he said to laughter in the gallery.
Teeuwissen said when the current administration learned of the problem, the chimpanzees were relocated to an indoor enclosure and the valve was turned off.
“I don’t believe in caging animals, but we couldn’t ask taxpayers or JXN Water to continue to pay for the water loss in this situation,” he said.
After turning the water off, the city learned of an additional leak at the chimp moat and has since learned of another leak at the duck pond.
“I’ll be out there next week to see what alternatives are,” he said. “After that, the city can determine the best use of money to restore the moat or duck pond.”
Said Teeuwissen, “My goal is to stop the loss of water at Livingston Park. We are 80 percent where we need to be. The next 20 percent should be done in the next two or three weeks.”
Wingate asked how much water loss had resulted because of the leaks, and how much he expects the zoo’s water bill to drop as a result of the repairs.
Teeuwissen was unsure how much water was lost, but explained how the chimpanzee moat had expanded as a result of erosion.
“The monkey moat was designed to be four feet wide. Over time [it’s] eroded to be about seven feet wide,” he said. “I would suspect it was a fairly significant loss out there.”
Teeuwissen, meanwhile, questioned whether Jackson should be on the hook for the full $6.9 million.
“Some amount of that charge is for sewage, and it’s undisputed the leak created no sewage that had to be treated,” he said.
Teeuwissen says JXN Water’s decision to withhold the $6.4 million does present a challenge for the city, which has to pay $891,000 a month as part of a $10.6 million contract with Richard’s Disposal.
“Because JXN Water under-collects from customers, we’re not getting 100 percent,” he said. “Having that $6.3… cashflow an entity puts a strain on the city.”
Henifin took over Jackson’s water system and water billing system in November 2022.
Under terms of the order, Henifin is responsible for billing customers for water, sewer, and sanitation, and remitting sanitation fees back to the city.
The collection rate, according to figures provided at Thursday’s hearing, is under 70 percent.
Said Teeuwissen, “While I respect Mr. Henifin’s cash crunch and need to use the funds to cash-flow their operations, the city has the same challenges.”
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